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Deakin Research Online
This is the published version:
Manning, Elizabeth and Dimovski, William 2007, Do MBA degrees matter? A study of
boards of directors in Australia's top 200 companies, International journal of learning, vol.
14, no. 5, pp. 1-5.
Available from Deakin Research Online:
http://hdl.handle.net/10536/DRO/DU:30007312
Reproduced with kind permission of the copyright owner. Readers must contact Common
Ground publishing for permission to reproduce this article.
Copyright : 2007, Common Ground Publishing
Do MBA Degrees Matter? A Study of Boards of Directors in
Australia's Top 200 Companies
Elizabeth Sophie Mary Manning, Deakin University, Victoria, Australia
Bill Dimovski, Deakin University, Victoria, Australia
Abstract: Pfeffer and Fong (2002) suggest that “business school enrolments have soared and business education has become
a big business”. The Master of Business Administration (MBA) degree has often been held out to be useful in the career
development of managers. The highest level that managers can aspire to, is to be a director of a large public company. This
study investigates how many directors within the boards of Australia’s top 200 companies by market capitalization hold an
MBA degree. We nd that larger companies have proportionally more MBA holding directors than smaller companies. In-
terestingly we also nd that proportionally more women hold MBAs than men; nearly one in ve women directors hold an
MBA within the top 200 companies dataset.
Keywords: Business Schools, MBA, Board of Directors, Women Directors, Management
Introduction
THERE HAS BEEN a great deal of discus-
sion in the literature regarding the boom in
business schools and the number of students
earning the Master of Business Administra-
tion (MBA) degree, along with the impact of an
MBA on the holder’s future earnings and advance-
ment prospects. Some studies show MBAs help their
holder obtain increased salaries and advancement
opportunities (Davies and Cline, 2005), along with
higher career satisfaction (Zhao et al, 2006). Another
study suggests that there is in fact no advantage in
obtaining an MBA, unless the graduate has no previ-
ous work experience, or has obtained their graduate
degree from one of the top business schools (Pfeffer
and Fong, 2002).
The MBA degree has however often been held
out to be useful in the career development of man-
agers. The highest level that managers can aspire to,
is to be a director of a large public company. If an
MBA is useful to the career development of man-
agers it would be reasonable to expect a large number
of directors of boards would hold an MBA. This
study investigates the numbers and proportions of
directors who hold an MBA degree within the boards
of Australia’s top 200 companies by market capital-
ization.
Related Literature
The literature relating to the usefulness of an MBA
for career advancement is mixed. Pfeffer and Fong
(2002) argue that possessing an MBA has little effect
on either graduate salaries or career attainment in
the longer run. They point to soaring enrolments and
the growth in the number of business schools, but
question the relevance of their “educational product”
(pp.78-79). They claim that the skills students learn
do not help equip them for business management,
partly because management is a “practice craft, and
the typical business school experience is too far re-
moved from the context of business.” (p.85). Further,
Pfeffer and Fong (2002) claim that the degree itself
“does not have much effect on graduates’ salaries or
career attainment” (p.80). Students that do gain from
obtaining an MBA are those that have graduated
from the most prestigious schools; thus it is the se-
lectivity of these programs, allowing potential em-
ployers to select from a “pre-screened pool” (Leon-
hardt, 2000, p.18) that guarantees the graduates’
success. Effectively, having an MBA from a presti-
gious school marks a person as being good enough
to be selected for that school; any further skills
gained are irrelevant. Pfeffer and Fong (2002) back
this claim by arguing that the types of courses offered
by schools are very similar, so the differences in
graduate outcomes must come from the differences
in the student bodies.
If MBAs do mainly offer a market signal to em-
ployers rather than a valuable education, then Pfeffer
and Fong (2002) suggest that the rapid increase of
the supply of business schools with stable (or pos-
sibly declining) demand for places means that the
advantage of holding an MBA is diluted. They fur-
ther point to the lack of barriers to entry into the
profession (unlike professions such as medicine and
law that mandate the achievement of a certain de-
gree), thus “it is not surprising that there is a smaller
effect on various economic outcomes” (p.83).
THE INTERNATIONAL JOURNAL OF LEARNING,
VOLUME 14, NUMBER 5, 2007
http://www.Learning-Journal.com, ISSN 1447-9494
© Common Ground, Elizabeth Sophie Mary Manning, Bill Dimovski, All Rights Reserved, Permissions: cg-support@commongroundpublishing.com
Pfeffer and Fong’s 2002 paper brought forth a
number of studies seeking to contradict and refute
their ndings, as well as some that have offered
support for some aspects of these ndings. Most of
these have concentrated on surveying graduates from
various schools, examining variables such as pre and
post MBA earnings, student satisfaction arising from
their MBA and subsequent career opportunities, and
students’ achievements 10 years on.
Connolly (2003) examines the difference between
the salary of MBA program participants at the begin-
ning and end of their MBA studies over a 4-year
cycle at the University of Miami, and nds an aver-
age after tax rate of return of around 10%. These
ndings are supported by the results of a survey of
new graduates conducted by Business Week (2000),
and a further survey of people who graduated 10
years ago (Business Week 2003).
Davies and Cline (2005) analysed data from 1993
– 2001 and concluded that an average graduate with
an MBA will receive a higher starting salary and
growth of compensation than a graduate with just an
undergraduate degree. The real rate of return on a
student’s investment in their MBA was calculated
to be around 15%.
Zhao et al (2006) conducted a survey of MBA
graduates from one business college (who graduated
between 1996 and 2002) and found that the graduates
felt that their MBAs have had a positive effect on
employment, income, promotions and job perform-
ance and satisfaction. 63% of those surveyed were
mid-level managers (with 18% at top executive
level).
Livingstone (2007) surveyed Fortune 1000 senior
executives and reported that the executives found
the MBA to be useful but not extraordinary in prepar-
ing graduates for the business world. The survey also
found evidence that suggests that executives are
looking for more experiential learning amongst
graduates; this nding offers some support for Pfeffer
and Fong’s (2002) claim that management skills re-
quire practice rather than (or together with) academic
learning.
There is support for Pfeffer and Fong’s (2002)
claim that benets to graduates depend on the
prestige of the institution they attended in an article
in The Economist (1994). The article suggests that
the highest returns to graduates who have completed
an MBA come from programs that also have the
highest academic reputation (measured by number
of research citations). However the article uses these
ndings to suggest that a good MBA offers skills
that practice alone cannot, and that gaining academic
knowledge through MBA programs gives their
graduates a competitive edge.
Carpenter (1997) nds that the “payoff” from
completing an MBA depends on how much you were
earning to start with (with those on higher starting
salaries taking much longer – if ever) to recoup the
total costs of the MBA) and also the business school
you went to. Carpenter also suggested there are better
job opportunities for MBA graduates in blue chip
consulting rms and investment banks.
Dreher and Ryal (2002) examined the relationship
between work experience prior to undertaking an
MBA, and career outcomes (looking at variables
such as salaries, promotions and career satisfaction)
after completion. They found that MBAs provided
more benets to those with limited work experience
before they undertook the MBA than those with even
a couple of years of work experience; in fact requir-
ing work experience before allowing students to enrol
in an MBA degree could be counter-productive.
Milne (2001) polled 100 executives from Canada’s
1,000 largest companies and found that 86 percent
of top executives said a graduate degree in business
is either very, or somewhat important to reach senior
management ranks within most organisations.
Data and Findings
Data on Australia’s top 200 companies by market
capitalisation as at March 2007 were collected from
the FinAnalysis database. This included data on each
of the directors of each of these companies, including
their gender, and whether the director had an MBA
degree. The companies were also categorised by
GICS sector (Global Industry Classication Stand-
ard) to see whether MBAs were more highly repres-
ented in certain types of industries.
Table 1 summarises the proportion of men and
women in Australia’s top 200 companies by market
capitalisation broken into groups of 50, and in aggreg-
ate. Women appear to be signicantly under-repres-
ented, making up only 8.2% of all directors in the
top 200 companies. Interestingly, the proportion of
women in the top 50 companies (13.2%) is more
than three times the proportion of women in the
bottom 50 of the 200 (4.0%) – the proportion de-
creases as the companies become smaller on average.
It appears that larger companies tend to employ more
women directors than men directors. What is also
interesting is that larger companies tend to employ
more directors overall than smaller companies. These
proportional gures have not changed signicantly
since a study conducted on gender composition of
the top 200 Australian companies in 2004 (Dimovski
and Kelly, forthcoming).
THE INTERNATIONAL JOURNAL OF LEARNING, VOLUME 142
Table 1: The Gender Composition of Australia’s Top 200 Companies by Market Capitalisation
2007 DirectorsSample size – 200
TotalWomenMenCompanies by Capitalisa-
tion
46361401Top 50
(13.2)(86.6)(% of top 50)
3853035551 – 100
(7.8)(92.2)
(% of next 50)
35321332101 – 150
(6.0)(94.0)
(% of next 50)
35014336151 – 200
(4.0)(96.0)
(% of top 50)
15511261424Total
(8.2%)(91.8%)(% of total)
Table 2 shows the proportion of men and women
who hold an MBA degree in the top 200 companies,
again broken into quartiles of 50. A total of 198 of
the 1551 directors, or 12.8% of all directors in the
top 200 companies hold MBAs. 175 of the 1424 male
directors hold an MBA, or 12.3%, whilst 23 of the
126 female directors hold an MBA, or 18.3%. This
suggests that slightly more than one in eight directors
in aggregate hold an MBA while nearly one in ve
women hold the MBA degree and slightly under one
in eight men hold the degree.
There are signicantly more women with an MBA
degree in the top 50 companies than in each of the
other three quartiles, as well as many more women
with the degree in the top 50 companies than in the
other three quartiles combined. It is also worth noting
that more men MBAs are employed in the top 50
companies quartile than in each of the other 3
quartiles. It appears that larger companies generally
employ more MBA holding directors than smaller
companies.
Table 2: The Proportion of Men and Women Holding an MBA Degree in Australia’s Top 200 Companies
MBAsSample size – 200
TotalWomenMenCompanies by Capitalisa-
tion
721359Top 50
(15.6)(21.3)(14.7)(% of men/women)
4324151 – 100
(11.2)(6.7)(11.6)
(% of men/women)
47542101 – 150
(13.3)(23.8)(12.7)
(% of men/women)
36333151 – 200
(10.3)(21.4)(9.8)
(% of men/women)
19823175Total
(12.8%)(18.3%)(12.3%)
Table 3 shows the break-up of MBA degrees into
different types of companies by GICS classication.
A total of 52 of the top 200 companies are classied
as Financials and hence engaged in banking, insur-
ance or other nancial activities. Of the 52 Financials
rms employing 419 directors of the 1551 total dir-
ectors, only around 12.7% of directors in total in this
industry sector hold an MBA degree. While there
appear to be proportionally more directors employed
in this sector, principally because they are larger
rms, the gures do not support the nding in Car-
penter (1997) that there are more opportunities for
MBA holders in banking; it appears the percentage
of MBA holders in the Financials industry sector is
not signicantly greater than the overall average.
Interestingly 7 of the total 23 women directors are
employed in this sector making it the largest female
MBA employing sector.
Of the 35 Consumer industry sector rms employing
nearly 300 directors, only 30 of the directors hold
3ELIZABETH SOPHIE MARY MANNING, BILL DIMOVSKI
MBAs with only 27 of the 267 male and 3 of the 31
female directors holding an MBA degree. There are
38 Materials industry sector rms in this data set,
which include chemical materials, construction ma-
terials (including cement, sand and concrete), metal
(including steel), aluminium, timber and timber
products materials, gold and gold mining rms.
Materials industry sector rms employ nearly 290
directors. Only 41 of the directors hold MBAs with
only 40 of the 271 male directors and 1 of the 13 fe-
male directors holding an MBA degree. The sector
does not appear to be a particularly appealing one to
women MBA holders.
There are 32 Industrials industry sector rms, which
include building, construction, electrical, heavy ma-
chinery and trading and distribution companies; these
employ nearly 240 directors. Only 25 of the directors
hold MBAs with only 21 of them being male direct-
ors and 4 of them being female directors. There are
16 Energy industry sector rms employing 114 dir-
ectors, of which only 5 are women. A total of 13
hold an MBA degree, of which only one is a woman.
Women seem to be under-represented in this sector
both as directors and as MBA holders.
There are 11 Utilities and 11 Health Care rms in
the top 200 Australian rms by market capitalisation.
They employ 82 and 76 directors respectively. They
also employ 18 and 13 MBA holding directors re-
spectively and tend have proportionally more MBAs
on their boards than other industry sectors (including
proportionally more women directors, although given
the small sample sizes in these two industry sectors,
this gender result is not particularly robust). It is
worth noting also that there are only 3 male MBA
holding directors (no female holding MBA directors)
amongst 42 directors in the 5 telecommunications
and information technology companies.
Table 3: MBAs by GICS Category
Total MBAsWomen with
MBAs
Men with
MBAs
TotalWomenMenGICS
(number of compan-
ies)
(% of total)
(% of women)(% of men)
3032729831267Consumer
(10.1)(9.7)(10.1)
(35)
131121145109Energy
(11.4)(20.0)(11.0)
(16)
5374641944375Financials
(12.7)(15.9)(12.3)
(52)
1531276571Health Care
(19.7)(60.0)(16.9)
(11)
2542123816222Industrials
(10.5)(25.0)(9.5)
(32)
4114028413271Materials
(14.4)(7.7)(14.8)
(38)
20227522Telecom
(7.4)(9.1)
(3)
1821682676Utilities
(22.0)(33.3)(21.1)
(11)
10115114Information Techno-
logy (6.7)(7.1)
(2)
Conclusion
This paper has examined the numbers and propor-
tions of MBA degree holding directors within Aus-
tralia’s top 200 companies. It nds little evidence
that an MBA is an absolutely essential qualication
for a director, with only about 13% of directors
holding such a degree. We nd however that the
larger, higher market capitalization companies have
proportionally more MBA holding directors than
smaller companies. Interestingly we also nd that
proportionally more women hold MBAs than men;
nearly one in ve women directors hold an MBA
within the top 200 companies dataset. Also, Financial
Services rms in Australia do not employ any more
MBA holding directors than the average, but this
sector is the largest female MBA employing sector.
THE INTERNATIONAL JOURNAL OF LEARNING, VOLUME 144
Acknowledgement The authors would like to thank Courtney Russell
for her research assistance on this project.
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About the Authors
Dr. Elizabeth Sophie Mary Manning
Deakin University, Australia
Dr. Bill Dimovski
Deakin University, Australia
5ELIZABETH SOPHIE MARY MANNING, BILL DIMOVSKI
